macro exam 3

Refer to Figure 32-1. If the real interest rate is 6 percent, the quantity of loanable funds demanded is

$20 billion, and the quantity supplied is $60 billion

A country has $60 million of saving and domestic investment of $40 million. Net exports are

$20 million

A country has I = $200 billion, S = $400 billion, and purchased $600 billion of foreign assets, how many of its assets did foreigners purchase?

$400 billion

A bank's reserve ratio is 8 percent and the bank has $1,000 in deposits. Its reserves amount to

$80

A country has national saving of $80 billion, government expenditures of $40 billion, domestic investment of $50 billion, and net capital outflow of $30 billion. What is its supply of loanable funds?

$80 billion

Suppose that a country imports $90 million worth of goods and services and exports $80 million worth of goods and services. What is the value of net exports?

-$10 million

A country has $45 million of domestic investment and net capital outflow of -$60 million. What is its saving?

-$15 million

If domestic residents of France purchase 1.2 trillion euros of foreign assets and foreigners purchase 1.5 trillion euros of French assets, then France's net capital outflow is

-.3 trillion euros, so it must have a trade deficit

Refer to Figure 28-3. At the equilibrium wage, how many workers are unemployed?

0

Refer to Figure 28-3. If the government imposes a minimum wage of $4, how many workers will be unemployed?

0

If M = 9,000, P = 6, and Y = 1,500, what is velocity?

1

Refer to Table 28-2. The number of adults not in the labor force of Aridia in 2012 was

1,400

If the exchange rate is 2 Brazilian reals per dollar and a meal in Rio costs 20 reals, then how many dollars does it take to buy a meal in Rio?

10 and your purchase will increase Brazil's net exports.

Refer to Table 29-3. If all banks in the economy have the same reserve ratio as this bank, then the value of the economy's money multiplier is

11.76

Refer to Table 29-4. The reserve ratio for this bank is

12.5 percent

Suppose every good costs $8 per unit and Molly holds $120. What is the real value of the money she holds?

15 units of goods. If the price of goods rises, to maintain the real value of her money holdings she needs to hold more dollars

Refer to Table 28-2. The labor force of Aridia in 2011 was

1900

If a U.S. dollar purchases 4 Argentinean pesos, and a gallon of milk costs $3 in the U.S. and 6 pesos in Argentina what is the real exchange rate?

2

An MP3 player in Singapore costs 200 Singaporean dollars. In the U.S. it costs 100 US dollars. What is the nominal exchange rate if purchasing-power parity holds?

2.0

In France a loaf of bread costs 3 euros. In Great Britain a loaf of bread costs 4 pounds. If the exchange rate is .9 pounds per euro, what is the real exchange rate?

2.7/4 loaves of British bread per loaf of French bread

Refer to Table 28-4. What is the adult population in Meditor?

240 million

If the reserve ratio is 4 percent, then the money multiplier is

25

A bank has $8,000 in deposits and $6,000 in loans. It has loaned out all it can given the reserve requirement. It follows that the reserve requirement is

25 percent

Suppose that some country had an adult population of about 50 million, a labor-force participation rate of 60 percent, and an unemployment rate of 5 percent. How many people were employed?

28.5 million

If $300 of new reserves generates $800 of new money in the economy, then the reserve ratio is

37.5 percent

Refer to Figure 32-1. The loanable funds market is in equilibrium at

4 percent, $40 billion

In the United States, a three-pound can of coffee costs about $5. If the exchange rate is 0.8 euros per dollar and a three-pound can of coffee in Belgium costs 7 euros. What is the real exchange rate?

4/7 cans of Belgian coffee per can of U.S. coffee

In the U.S. a candy bar costs $1. If the nominal exchange rate were 6 Chinese yuan per dollar and the real exchange rate were 1.2, then, what would be the price of a candy bar in China?

5 yuan

Refer to Figure 28-3. At the equilibrium wage, how many workers are employed?

5,000

If M = 2,000, P = 2.25, and Y= 6,000, what is velocity?

6.75

Refer to Table 28-4. What is the adult labor-force participation rate in Meditor?

66.7%

Refer to Figure 32-2. What are the equilibrium values of the real exchange rate and net exports?

8, 400

If the price level increased from 120 to 130, then what was the inflation rate?

8.3 percent

Suppose that the adult population is 4 million, the number of unemployed is 0.25 million, and the laborforce participation rate is 75%. What is the unemployment rate?

8.3%

Refer to Table 29-3. The bank's reserve ratio is

8.5 percent.

The nominal exchange rate is about 2 Aruban florin per dollar. If a basket of goods in the United States costs $40, how many florins must a basket of goods in Aruba cost for purchasing-power parity to hold?

80 florin

The adult population in the town of Shelbyville is 150 thousand. If 100 thousand people are employed and 20 thousand are unemployed, then the labor force participation rate is approximately

80%

Which of the following is an example of U.S. foreign direct investment?

A U.S. based restaurant chain opens new restaurants in India.

Which of the following is an example of U.S. foreign portfolio investment?

A U.S. citizen buys bonds issued by the British government.

Which of the following statements is correct?

All items that are included in M1 are included also in M2

A bank has a 5 percent reserve requirement, $5,000 in deposits, and has loaned out all it can given the reserve requirement

It has $1,000 in reserves and $4,000 in loans.

Last year, Jane spent all of her income to purchase 200 units of corn at $5 per unit. This year, she spent all of her income to purchase 180 units of corn at $6 per unit

Jane's nominal income increased this year, but her real income decreased

In a 100-percent-reserve banking system, if people decided to decrease the amount of currency they held by increasing the amount they held in checkable deposits, then

M1 would not change

Meredith is looking for work as a computer programmer. Although her prospects are good, she has not yet taken a job. Julie is looking for work in a steel mill. Every time she shows up for an interview, there are more people looking for work than there are openings. Someone waiting in line with her tells her it has been that way for a long time

Meredith is frictionally unemployed, and Julie is structurally unemployed

If the U.S. government increased its deficit, then

U.S. bonds would pay higher interest and a dollar would purchase more foreign goods.

If interest rates rose more in Japan than in the U.S., then other things the same

U.S. citizens would buy more Japanese bonds and Japanese citizens would buy fewer U.S. bonds.

The real exchange rate is the nominal exchange rate, defined as foreign currency per dollar, times

U.S. prices divided by foreign prices.

If the budget deficit increases, then

U.S. residents will want to purchase fewer foreign assets and foreign residents will want to purchase more U.S. assets

Which of the following both increase the money supply?

a decrease in the discount rate and a decrease in the interest rate on reserves

Capital flight refers to

a large and sudden movement of funds out of a country.

The term hyperinflation refers to

a period of very high inflation

When a minimum-wage law forces the wage to remain above the equilibrium level, the result is

a surplus of labor and a shortage of jobs.

If a country has saving of $2 trillion and investment of $1.5 trillion, then it has

a trade surplus and its net capital outflow = $.5 trillion.

Which of the following equations is always correct in an open economy?

a. NX = Y - C - G - I b. NX = S - I c. NX = NCO d. All of the above are correct

If you go to the bank and notice that a dollar buys more Japanese yen than it used to, then the dollar has

appreciated. Other things the same, the appreciation would make Americans more likely to travel to Japan

If purchasing-power parity holds, a dollar will buy

as many goods in foreign countries as it does in the United States

The confidence you have that a retailer will accept dollars in exchange for goods is based primarily on money

being a medium of exchange.

Some persons are counted as out of the labor force because they have made no serious or recent effort to look for work. However, some of these individuals may want to work even though they are too discouraged to make a serious effort to look for work. If these individuals were counted as unemployed instead of out of the labor force, then

both the unemployment rate and labor-force participation rate would be higher

If Saudi Arabia had negative net exports last year, then it

bought more abroad than it sold abroad and had a trade deficit.

When conducting an open-market purchase, the Fed

buys government bonds, and in so doing increases the money supply.

Which of the following is a source of frictional unemployment?

changes in the composition of demand among industries or regions

Which of the following is not included in M1?

credit cards

If inflation is higher than what was expected

creditors receive a lower real interest rate than they had anticipated.

The deviation of unemployment from its natural rate is called

cyclical unemployment

If the natural rate of unemployment is 5.2 percent and the actual rate of unemployment is 5.7 percent, then by definition there is

cyclical unemployment amounting to 0.5 percent of the labor force

If the Canadian nominal exchange rate does not change, but prices rise faster abroad than in Canada, then the Canadian real exchange rate

declines

A Japanese bank buys U.S. government bonds, this purchase

decreases U.S. net capital outflow, but increases Japanese net capital outflow.

When the price level falls, the number of dollars needed to buy a representative basket of goods

decreases, so the value of money rises

A decrease in the money supply creates an excess

demand for money that is eliminated by falling prices.

If the number of Japanese yen a dollar buys falls, but neither country's price level changes, then the real exchange rate

depreciates which causes U.S. net exports to increase

Some individuals would like to have a job, but they have given up looking for a job after an unsuccessful search. These individuals are called

discouraged workers, and they are not classified by the Bureau of Labor Statistics as unemployed

If P = domestic prices, P* = foreign prices, and e is the nominal exchange rate, which of the following is implied by purchasing-power parity?

e = P*/P

If the number of dollars needed to buy a representative basket of goods falls, the price level

falls, so the value of money rises.

An appreciation of the U.S. real exchange rate induces U.S. consumers to buy

fewer domestic goods and more foreign goods

If interest rates rise in the U.S., then other things the same

foreigners would buy more U.S. bonds which reduces the quantity of loanable funds demanded in the U.S.

When Haley states that inflation by itself always reduces the real return on her saving, she

has committed the inflation fallacy.

Wealth is redistributed from debtors to creditors when inflation was expected to be

high and it turns out to be low

Deflation decreases

incomes and reduces the ability of debtors to pay off their debts.

Unemployment insurance tends to

increase frictional unemployment

The effects of unionization on wages in the sectors of the economy that are unionized causes the supply of labor in other sectors of the economy to

increase, reducing wages in industries that are not unionized.

U.S- based Dell sells computers to an Irish company that pays with previously obtained U.S. currency. This exchange

increases U.S. net capital outflow because the U.S. acquires foreign-owned assets.

The source of hyperinflations is primarily

increases in money-supply growth.

The Fed's policy decisions have an important influence on

inflation in the long run and employment and production in the short run.

The real interest rate is 4 percent and the nominal interest rate is 6 percent. Is there inflation or deflation? What is the inflation or deflation rate?

inflation; 2 percent

When the Fed conducts open-market purchases,

it buys Treasury securities, which increases the money supply

Which of the following is an explanation for the existence of frictional unemployment?

job search

In a fractional-reserve banking system, a bank

keeps only a fraction of its deposits in reserve

When the U.S. real interest rate falls, purchasing U.S. assets becomes

less attractive and so U.S. net capital outflow rises.

When the real exchange rate for the dollar depreciates, U.S. goods become

less expensive relative to foreign goods, which makes exports rise and imports fall.

If the discount rate is raised then banks borrow

less from the Fed so reserves decrease

Refer to Table 29-4. If $800 is deposited into the First Bank of Fairfield, and the bank takes no other actions, its

liabilities will increase by $800

Marta lends money at a fixed interest rate and then inflation turns out to be higher than she had expected it to be. The real interest rate she earns is

lower then she had expected, and the real value of the loan is lower than she had expected.

Reserves increase if the Federal Reserve

lowers the discount rate or auctions more credit

The costs of changing price tags and price listings are known as

menu costs

When the real exchange rate for the dollar appreciates, U.S. goods become

more expensive relative to foreign goods, which makes exports fall and imports rise

Because a government budget deficit represents

negative public saving, it decreases national saving.

In an open economy

net capital outflow = net exports

In the open-economy macroeconomic model, if a country's interest rate falls, then its

net capital outflow and its net exports rise

In the U.S., taxes on capital gains are computed using

nominal gains. This is one way by which higher inflation discourages saving

Marginally attached workers are people who are

not working and are not looking for work, but would work if asked.

A U.S.-imposed quota on automobiles would shift

only the demand curve in the market for foreign-currency exchange right.

Which tool of monetary policy does the Federal Reserve use most often?

open-market operations

Credit cards defer

payments

In the open-economy macroeconomic model, the source of the supply of loanable funds is

public saving + personal saving

An increase in the budget deficit

reduces investment because the interest rate rises

People can reduce the inflation tax by

reducing cash holdings.

Shoeleather cost refers to

resources used to maintain lower money holdings when inflation is high.

Other things the same, an increase in the U.S. interest rate causes the quantity of loanable funds supplied to

rise because national saving rises.

Consider two labor markets in which jobs are equally attractive in all respects other than the wage rate. All workers are equally able to do either job. Initially, both labor markets are perfectly competitive. If a union organizes workers in one of the markets, then the wage rates will tend to

rise for the union jobs and fall for the nonunion jobs.

If the Mexican nominal exchange rate does not change, but prices rise faster in Mexico than in all other countries, then the Mexican real exchange rate

rises

If foreigners want to buy more U.S. bonds, then in the market for foreign-currency exchange the exchange rate

rises and the quantity of dollars traded falls.

Other things the same, people in the U.S. would want to save more if the real interest rate in the U.S

rose. The increased saving would increase the quantity of loanable funds supplied

Frictional unemployment is inevitable because

sectoral shifts are always happening

To decrease the money supply, the Fed can

sell government bonds or increase the discount rate

Norma complains that she is not receiving the full benefit of her six percent raise, because inflation is two percent. You tell her that nominal incomes tend to rise with inflation, therefore

she is committing the inflation fallacy.

Cyclical unemployment refers to

short-run fluctuations around the natural rate of unemployment

People who are unemployed because wages are, for some reason, set above the level that brings labor supply and demand into equilibrium are best classified as

structurally unemployed

In the open-economy macroeconomic model, a decrease in the domestic interest rate shifts

supply in the market for foreign-currency exchange to the right

If at a given exchange rate foreign citizens want to buy fewer U.S bonds, then the

supply of dollars in the market for foreign-currency exchange shifts right.

When a government increases its budget deficit, then that country's

supply of loanable funds shifts left

Efficiency wages create a labor

surplus and so increase unemployment.

Refer to Figure 32-2. If the real exchange rate is 1, then there is a

surplus of 100 so the real exchange rate will fall.

Minimum wages create unemployment in markets where they create a

surplus of labor. Unemployment of this type is called structural

A tax on imported goods is called a(n)

tariff

A problem that the Fed faces when it attempts to control the money supply is that

the Fed does not control the amount of money that households choose to hold as deposits in banks

When the Mexican peso gets "stronger" relative to the dollar,

the U.S. trade deficit with Mexico falls

The Fed's control of the money supply is not precise because

the amount of money in the economy depends in part on the behavior of depositors and bankers

The velocity of money is

the average number of times per year a dollar is spent

In the open-economy macroeconomic model, if for some reason foreign citizens want to purchase more U.S. goods and services at each exchange rate, then

the demand for dollars in the market for foreign-currency exchange shifts right.

The rate at which the Fed lends money to banks is

the discount rate.

Nominal GDP measures

the dollar value of the economy's output of final goods and services.

Liquidity refers to

the ease with which an asset is converted to the medium of exchange.

If velocity and output were nearly constant, then

the inflation rate would be about the same as the money supply growth rate.

Under the assumptions of the Fisher effect and monetary neutrality, if the money supply growth rate rises, then

the nominal interest rate rises, but the real interest rate does not

In the long run, money demand and money supply determine

the price level but not the real interest rate.

Ariana is the CEO of a corporation that hires nonunion labor. According to the theory of efficiency wages, if she decides to pay her workers more than the competitive equilibrium wage, then

the profits of her firm might increase.

If government policy encouraged households to save more at each interest rate, then

the real exchange rate would fall and net exports would rise

In the open-economy macroeconomic model, the market for loanable funds equates national saving with

the sum of domestic investment and net capital outflow

Suppose that some people report themselves as unemployed when, in fact, they are working in the underground economy. If these persons were counted as employed, then

the unemployment rate would be lower, and the labor-force participation rate would be unaffected.

Net capital outflow equals

the value of foreign assets purchased by domestic residents - the value of domestic assets purchased by foreigners

When the Consumer Price Index falls from 110 to 100

there is deflation of 9.1% and the value of money increases.

Kelly puts money in a savings account. One year later she has two percent more dollars and can buy three percent more goods. Kelly earned a real interest rate of

three percent and prices fell one percent.

Eric was laid off two months ago. He has not searched for other work because he is expecting to be recalled to work. The Bureau of Labor Statistics counts Eric as

unemployed and in the labor force

Sam deposits money into an account with a nominal interest rate of 4 percent. He expects inflation to be 1.5 percent. His tax rate is 32 percent. Sam's after-tax real rate of interest

will be 1.2 percent if inflation turns out to be 1.5 percent; it will be higher if inflation turns out to be lower than 1.5 percent.

Your boss gives you an increase in the number of dollars you earn per hour. This increase in pay makes

your nominal wage increase. If your nominal wage rose by a greater percentage than the price level, then your real wage also increased.